Boeing 737NG Freighter Conversions Decision Looms

Boeing by the end of this year hopes to decide if it will launch its own freighter conversion program for the Boeing 737NG or license the engineering data to a third party for the design work, certification and marketing. But the airframer does not expect the first 737-700 and 737-800 conversions to go to market until 2017 at the earliest.

“We think the market will shape itself in the latter half of this decade to make a 737NG program viable,” says Brian Hermesmeyer, marketing director-freighter conversions, for Boeing Commercial Airplanes. That could mean 2017, 2018 or 2019 for the 737-700 and 737-800, with the newer -900ER following after, he adds.

Airlines are eager for a 737NG conversion program, once the price is right. As Aviation Week reported earlier this month, Dublin-based aircraft leasing company Aergo Capital, which has partnered with Pemco on the conversion of as many as 20 Boeing 737 Classics, sees that accord as a stepping stone to a subsequent agreement with Pemco on NG conversions (Aviation Daily, Jan. 6).

Airlines and lessors are pushing for the NG conversion because the aircraft have good economics, modern avionics and 12 container positions, which is more than the 737-400 has, Robert Convey, VP-sales and marketing at AEI, told Aviation Week. “It’s still an expensive aircraft, but the people asking for the conversion already own the aircraft,” Convey said.

Boeing, however, will have to decide when the time is right to forge ahead with a conversion program. Convey believes Boeing may be worried about starting a conversion program too early for an aircraft that still is popular and in production.

The manufacturer says a lot of factors are involved in conversion timing decisions, including the age of the aircraft, the number of cycles on them, the cost of reconfiguration and, perhaps most importantly, the aircraft’s residual value.

“With conversions, it always comes down to residual value,” says Brian Hermesmeyer, marketing director-freighter conversions, for Boeing Commercial Airplanes. Right now, the -800s have a higher residual value than the -700s, but freight operators seem to want the -800’s higher capacity, he adds.

For example, China’s domestic express market for freight is growing rapidly, often with 737 Classics, but the country is pushing the implementation of performance-based navigation to alleviate the pressure on its air traffic control system.

Many of the -300s and -400s are not equipped for that, so Chinese freight operators would have to choose between upgrading the avionics or ordering a later-generation aircraft.

“Those are the kinds of things we look at” in deciding when the time is right for conversions, Hermesmeyer says.

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